The economy is undoubtedly going through a rough time, but the troubled market should not disrupt the outlook for long-term savers. The primary stock market investment for most people is their pension which may have some in an uneasy state of mind after reviewing their latest statements. There has been a significant decline in the market with the FTSE 100 dropping almost ten percent in the first quarter.
For those long-term pension savers participating in defined benefit plans or final salary schemes, there is no need to worry as employers must fulfill their promises. This is the main reason the defined benefit or final salary retirement funds are becoming so popular among public sector workers who can rely on tax money to guarantee their pension. However, those new to the workforce are seeing a trend of final salary schemes no longer an option at the onset of employment.
For those not participating in a final salary scheme, the troubled market is causing some concern and certainly not leaving much extra cash available for long-term savings. The majority of money purchase schemes and defined contribution pension plans were worth less at years end as compared to when they started regardless of extra contributions by both employees and employers. It should come as no surprise that so many workers have concluded that it is not worth the effort with savings slumping to the lowest level in nearly fifty years.
Statistics report that consumers have saved only 1.1% of their household income during the first quarter compared with nearly 10% saved ten years ago. This significant drop in savings is likely due to the reported decrease in available discretionary income as a result of the sharp rise in food prices and petrol costs, among other increased commodity prices. The math is simple. There is less money to put into savings. In fact, households are reporting that they are slowly dipping into their savings to cover basic expenses no longer met by their previous budgets.
Analysts have warned of a recession lasting through the next year and possibly longer. The problem is that savings will deplete at some point leaving household with the next option of relying on credit cards to meet these same expenses. Fortunately, this can be avoided if households prepare in advance and begin supplementing their income to avoid reaching into savings at all. The internet offers many opportunities for ordinary people to earn extra money and many consumers have taken advantage of some of these opportunities to regain control of their finances.
One such opportunity arises from gaming, the largest growing industry on the internet. Its popularity should be no surprise with the potential for guaranteed returns of as much as 12% each month. With the availability of state-of-the-art software such as ArbAlarm, it is now possible to scan prices globally and quickly locate risk-free betting opportunities. Former trader Rajeev Shah explains the unique investment method behind arbitrage trading in his book Sports-Arbitrage – How to Place Riskless Bets and Create Tax-Free Investments. In short, an arbitrage occurs when different bookmakers’ prices on the same events overlap. In these cases, it is possible to bet on all of the outcomes in that event so that there is a total return greater than the total outlay. Even better, the profits from arbitrage trading are free of income tax and capital gains tax according to the UK government’s recent announcement though the Treasury.
Those troubled by the stock market and watching their retirement fund decrease on each statement may want to look into other investment or risk-free income opportunities as described above. Experts have reported that the economy will likely become worse better it improves and many of us do not have time to wait.
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